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Tuesday, 15 June 2010
Page: 3198


Senator KROGER (12:52 PM) —I rise to speak on the Excise Tariff Amendment (Tobacco) Bill 2010 and the related Customs Tariff Amendment (Tobacco) Bill 2010. As we have heard, the aim of both of these bills is to finally and retrospectively legitimise the appropriation measures the Rudd government introduced on 29 April, when it raised the tobacco excise by some 25 per cent overnight. The coalition will not oppose these two bills. I do not think anyone would suggest that smoking is not a terrible habit that causes social and personal problems, including the direct effect on health and the burden it places on the health system. Yet I do wish to comment on this legislation, which I support, despite having reservations about the purpose, target and effectiveness of this measure.

The increase in excise is budgeted to raise $5 billion over the next four years. Without this increase in excise the Rudd Labor government has no chance of returning the budget to surplus in the near future. So it makes one question what the actual reason behind this is. The policy was announced overnight and it makes one question whether it was thought through before it was drafted. It brings to mind so many other policies the government has introduced over the last 12 months that have failed because they were poorly thought through, rushed through this place and then very irresponsibly implemented.

It is clear that the government, when putting its budget papers together, understood the financial mess that it had created and which we are now dealing with. All governments have two courses of action when getting into debt: they either reduce their spending or raise taxes, whilst delaying the implementation of perhaps expensive programs such as the shelving of the much mooted ETS. The $5 billion tobacco tax and the $9 billion resources tax are both polices made on the run and should be seen for the desperate tax grabs that they both are. The Australian people are not fools and they see both of these proposals as such. The rush to implement both of these policies is in part responsible for the complete failure of the Rudd government to articulate, demonstrate and sell why they are good public policies. I question how they can sell an increase in tobacco tax as a way to lower tobacco consumption whilst suggesting that a hike in mining tax will actually increase the amount of mining investments.

But let us refer to the measure itself, which Mr Rudd has referred to as a ‘crackdown’ on smoking. Mr Rudd announced in a press release:

This measure alone is expected to cut total tobacco consumption by around six per cent and the number of smokers by two to three per cent—around 87,000 Australians.

As we know, the Prime Minister is rather inclined to use over-the-top language. He is a tad florid in the way he likes to describe things. In the past we have heard him articulate a war on everything—a war on inflation and unemployment, a war on pokies, a war on drugs in sport and a war on bankers’ salaries. It is interesting, though, that he has promised a mere crackdown on tobacco. He is clearly learning that a declaration of a war on everything does not translate to the development of good public policy and its implementation.

Putting this notion aside, one can only hope that the measure will deliver on the desired outcomes. There is absolutely and unquestionably no doubt that smoking is bad and puts immense pressure on the Australian economy. It is estimated that the Australian economy loses around $5.4 billion in lost productivity each year and we all hope that this measure will indeed stop people smoking. But it would be irresponsible of us in this place not to question whether this legislation will achieve that aim.

As a Liberal, I am a strong supporter and advocate for the use of market instruments to deliver outcomes. Price incentives are generally the most appropriate measure to create a change in people’s behaviour, but there are exceptions to this rule—and this is especially the case when we are talking about social behaviour, particularly addictions. Most Australians who have smoked or who still smoke would have all said the words ‘I’ll give it up tomorrow’ and have meant it. They know that their habit affects their health, their lifestyle and their families. Some medical research suggests that nicotine addiction is as powerful, or even more powerful, than heroin addiction. Senator Fierravanti-Wells has already talked about the effect of nicotine’s addictive nature.

If this is the case, then understandably quitting is a serious challenge that some will struggle with. Research also indicates that there is a high incidence of smokers in socially disadvantaged communities, including the Indigenous population. It concerns me greatly that people in these communities will not have the capacity or support that may be necessary to reduce—or, ideally, quit—smoking and they may possibly spend less on essentials, such as food, in order to support their continuing smoking habit. In effect, for many of these people an increase in excise will just disadvantage them further.

It is true that, since Australia took a tough stance on tobacco, smoking rates have continuously declined. It is heartening to see that especially in the younger population people are less likely to become smokers today. I am absolutely proud of the stance that the former coalition government took. It is through education that among the younger generation, the 18- to 24-year-olds—who are well and truly represented in the gallery here today—there is a culture of intolerance to smoking. That is something I applaud and something we have to endeavour to encourage and continue. Recent ABS data shows that only 23 per cent of 18- to 24-year-olds are smoking, compared with 36 per cent in 1990. So there has been a dramatic decline. The number of Australian smokers has declined overall by 24 per cent in the same period. Education is a critical component in the fight, and I am concerned that in this legislation there is only a modest attempt to address this.

In the recent budget, the Rudd government announced an investment of an additional $27.8 million over four years in the rebadged National Tobacco Campaign targeted approach, bringing the total amount to be spent in this campaign to $85 million in total over the next four years. When you work this out per smoker this equates to only an extra $2.30 per smoker per year to help them quit their habit. Considering the significance of what we are talking about here, it is a drop in the ocean. We need to put this in the context of $126 million that is being spent on advertising a shelved ETS, a vilified mining tax, an irresponsible NBN proposal, COAG health reform that is, as Senator Fierravanti-Wells aptly described it, without substance or sense and a PPL scheme that has not passed this place yet. One has to question the motivation of this government, and it seems to be linked more to the timing of an election.

The other area that seems to have been given little consideration is the potential impact on illicit trade. There does not seem to be any reference to it in the bills, the Bills Digests or the budget papers, which is concerning. This so-called crackdown on tobacco does not include any new funding or initiatives for addressing a possible increase in the illegal trade in tobacco. According to a recently published study, illicit trade is a huge problem. The consultants PricewaterhouseCoopers have found that the illegal tobacco industry is costing the nation some $600 million a year in lost revenue. This is a huge black market that is happening out there every day. They estimate that more than 12 per cent of all tobacco consumed in Australia is illegal and thus escapes excise. These figures were published in February, long before the increase in excise was announced. Even back then, the study said that avoiding tax was what drove illegal tobacco sales. Any increase in excise should include the consideration of the incentive for criminals to sell illegal tobacco on the black market. It should be addressing this very significant problem.

In Senate estimates we learnt that the federal government has no plans to tackle the illegal trade in tobacco which this tax hike will surely exacerbate. There will be no extra resources allocated to help Customs and Border Protection combat the expected surge in this trade. I have also been advised that illicit tobacco is an unhealthier product, if that is possible, because it contains a lot of contaminants and chemicals in addition to those found in legal tobacco. The other part of the government’s so-called crackdown on tobacco is its intent to introduce plain packaging. Whilst this is covered with a different set of bills, it impacts on the effectiveness of the legislation before us, as it will be a lot easier for providers to sell illicit tobacco.

Any genuine measures to improve the health and wellbeing of Australians are a good thing, but we must look at whether this legislation is actually the best way to achieve this outcome. As was demonstrated under the former coalition government, education is critical and should be front and centre of all endeavours to reduce the incidence of smoking. No government should hide behind the easily uttered claim of improving health outcomes whilst there is the very real danger that this measure will not live up to its expectations and will become only a means to increase tax.